Portugal’s Contraction Slows Down In 1Q

By

Patricia Kowsmann

May 15, 2012 7:39 am EST

Portugal’s economy shrank at a slower pace in the first three months of 2012, but the country will likely remain in recession for the rest of the year as the government forges ahead with painful efforts to rein in its deficit.

Gross domestic product shrank 2.2% in the first quarter in annual terms and 0.1% from the last three months of 2011, according to a preliminary estimate from the National Statistics Institute.

In the fourth quarter, the economy contracted 2.9% from a year ago and 1.3% from the third quarter.

The estimate doesn’t include a breakdown of growth, but the agency said domestic demand fell less in the first three months of the year than in the previous quarter. Exports have also risen, but the effect was dented by a slower fall in imports.

Investors are closely watching Portugal for signs that its austerity measures are hitting the economy harder than expected. The measures are required under the country’s €78 billion bailout package.